Investors are apparently hot for 5G

Technology solutions provider World Wide Technology asked some big shot financial investors where the smart money is in relation to 5G speculation.

The survey, put together alongside a firm amusingly called Walnut Unlimited, comprised of 100 interviews with VCs and investors across the UK and US, who were selected on the basis of their active interest in telecoms and/or IT.

Apparently more than half of the respondents manage assets of over $2 billion, while 2 in 5 manage assets of over $5 billion. The inference seems to be that picking the brains of these tech focussed money bags will garner some sharper insights than your average pleb on the street-based poll.

Apparently 92% of the respondents are invested or are planning to invest in companies ‘dependent on 5G technology’. 57% of them reckoned 5G-reliant companies will provide above average returns, with 18% predicted a lower than average return. More long term, 76% predicted an above average return in the next six to ten years.

They were also asked where they think the most ROI is with regards to the 5G investment landscape – or to put it another way which sectors are going to be transformed by it first. The top 5 sectors for 5G investment were listed as (in descending order of votes) cloud computing, smart mobility, media and entertainment, gaming, and AR/VR. So that’s most bases covered then.

The investors were apparently confident in operator’s ability to capitalise on 5G. When asked ‘Can you name any 5G-enabled companies that are expected to make it big in the next 12 months?’ 41 of the 100 respondents named an operator. There were many more data points besides, which you can read here,  in general the picture presented is that of a bullish attitude towards 5G related sectors by some specialist investors. But there was also a warning for operators.

“5G is hot and it’s getting hotter – that’s the investor’s view,” stated the report. “Our respondents see massive opportunity in various applications that use the technology, the businesses that provide them, and those that facilitate their delivery.”

“However, to revisit the contention from the introduction of this report: we are at a stage where 5G has launched, but there has been no big bang, either for its consumers or its providers. Now, network operators are in danger of finding themselves in a similar situation to the one they did midway through the 4G era. Laden with high network costs and mired in a race to the bottom to capture subscribers, infrastructure became commoditized, without the opportunity to generate new revenues from value-add technologies. While technology companies that used operators’ infrastructure thrived, the revenues of operators themselves dwindled.”

This is an interesting point – while there is obviously a lot of fanfare around 5G and all the areas of life it is supposed to be transforming, there’s the question of who will actually end up being the chief benefactors from it – with many operators noting it’s the streaming services and cloud providers more than any pureplay telecoms firms that seem to be making the most out of modern network infrastructure.

The report has some advice for operators looking to capitalise on 5G and become more than ‘dumb pipes’:

“The past has shown that providing connectivity by itself is not enough to capitalize on the opportunity new technology infrastructure presents. It’s by being germane to the application experience that operators become gatekeepers to better services and reap the rewards from their investments.

“By continuing to build a 5G platform, operators can change their relationship with the customers using their networks, making their technology platforms indispensable to innovators and app developers. They become 5G Application Enablers, creating environments where innovation can thrive. No longer a dumb pipe, but the best intelligent pipe on the market for the specific applications they empower. This moves their business from a provider of 5G connectivity to a catalyst to unlock the potential of 5G.”

Which seems like a fair summation of some of the pressures operators find themselves in terms of getting ROI from continued network development. But whether you call them dumb pipes or not, the business model is still primarily selling connectivity, and with the cost of entry being so high, you don’t tend to get many disrupters entering the market. Never mind how much money investors are dropping on the table, pivoting operator business models to become more software focussed, or a ‘more intelligent pipe’ is probably easier said than done.